Monday, February 23, 2009

Pain Street Economics

Congressman Anthony Weiner has shed some light on a problem that we've been highlighting for many months-neighborhood stores are in deep trouble. As City Room first reported: "Wall Street’s woes, complete with bankers toting boxes out of their old offices, are well known and even well televised. But away from the spotlight, more insidious departures are under way in Queens and other boroughs. A census by Representative Anthony D. Weiner shows a troubling list of avenues in Queens with a growing number of empty storefronts.According to the survey of 1,730 stores in Queens, 211 are closed or about to close. In all, 12 percent of what Mr. Weiner calls “community stores” are vacant in Queens, twice the rate of a year ago."

And things will probably get worse as some of the high rent paying chain stores that replaced many small retailers go into bankruptcy and close their doors-like Circuit City has done; leaving more commercial strip vacancies. This trend, also highlighted by the disappearance of local supermarkets, has been exacerbated by the recession-but let's be clear, it didn't start with it.

Government policy-particularly the Bloomberg tax attack on commercial real estate, and his regulatory onslaught on local retailers-has made doing business in the neighborhood difficult. And this difficulty, in turn was itself exacerbated by the invasion of chain drug stores and banks that spiked local rents beyond the reach of independent, Mom and Pop, store owners.

So what does the fiscal maven do in response? Mike Bloomberg comes up with some kind of government entrepreneur program that appears to be directed at laid off Wall Streeters. What we certainly don't need is any government program to jump start the local economy. What we need is for the mayor to dramatically lower tax rates for store owners-and even offer small business tax incentives for hiring local folks.

Some of this we laid out in our critique of the draft supermarket initiative; lower the cost of doing business is the key to spurring small business growth. Or, alternatively devising policy initiatives-like allowing food stores to sell wine-that will advance the profitability of local retail outlets.

But even Congressman Weiner doesn't get this-his philosophy in this regard acts as an impediment to clear thinking: "Mr. Weiner said New York City has more than 200,000 small businesses, 96 percent of which have fewer than 50 employees. These businesses employ two-thirds of the workers in private-sector jobs. Mr. Weiner said the $787 billion stimulus package signed this week by President Obama would help businesses in Queens get back on their feet. The plan includes $750 million to improve existing Small Business Administration loan programs and to create new loans. Another $375 million is available to eliminate or reduce government fines and fees for borrowers and lenders with existing S.B.A. loans."

Loan programs are okay, but they aren't the key to true economic stimulation-only ancillary to a real growth policy that lowers tax and regulatory burdens. The stimulus money should have been directed to lowering tax rates for small businesses-bypassing bureaucratic red tape and government boondoggles. So, hats off to Weiner for highlighting the problem; but now we need an appropriate response so that the backbone of the local economy can recover and help the city in its time of need.